Culver Company is required to pay $5,000 each year to the lessor for executory costs.
Determine the compensation expense recognized by BC in each year from 2016 to 2021.
September 19, 2019Changes in Accounting Principles and Changes in Accounting Estimates
September 19, 2019Culver Company is required to pay $5,000 each year to the lessor for executory costs.
Question Description
Flounder Leasing Company signs a lease agreement on January 1, 2017, to lease electronic equipment to Culver Company. The term of the noncancelable lease is 2 years, and payments are required at the end of each year. The following information relates to this agreement:
| 1. | Culver Company has the option to purchase the equipment for $15,800 upon termination of the lease. | |
| 2. | The equipment has a cost and fair value of $150,000 to Flounder Leasing Company. The useful economic life is 2 years, with a salvage value of $15,800. | |
| 3. | Culver Company is required to pay $5,000 each year to the lessor for executory costs. | |
| 4. | Flounder Leasing Company desires to earn a return of 10% on its investment. | |
| 5. | Collectibility of the payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor.
show your solution in a word document |
